The inaugural ceremony is to be headed by its namesake, King Abdullah bin Abdulaziz Al-Saud, as well as several world leaders, dignitaries and officials.

The campus is built along the Red Sea coast about 80km north of the commercial centre of Jeddah.

Saudi officials have envisaged the postgraduate institution as a crucial part of the kingdom's plans to transform itself into a global scientific hub - the latest effort in the Gulf region to diversify its economic base.

'Mixed-gender' classes

But KAUST, whether its founders intend it or not, has the potential to represent one of the clearest fault lines in a battle between conservatives and modernisers in the kingdom.

Saudi Arabia is the most religiously strict country in the Middle East with total segregation of the sexes.

"We do not restrict how they wish to work among themselves ... It's a research environment driven by scientific agenda"

Choon Fong Shih, president of KAUST

But the new university will not require women to wear veils or cover their faces, and they will be able to mix freely with men.

They will also be allowed to drive, a taboo in a country where women must literally take a back seat to their male drivers.

With KAUST's inauguration, "we see the beginning of a community that is unique" in Saudi Arabia, Choon Fong Shih, the university's president, told The Associated Press on Tuesday.

"We recruit the very best in the world ... and we give them the freedom to pursue their scientific interests."

KAUST has enrolled 817 students representing 61 different countries, of whom 314 begin classes this month while the rest are scheduled to enroll in the beginning of 2010.

The aim is to expand to 2,000 students within eight to 10 years. Of that total, 15 per cent are Saudi, say university officials.

'Scientific agenda'

The 71 faculty members include 14 from the US, seven from Germany and six from Canada.

The university is being launched at a time when oil producing countries have been increasing their push to focus on education and development programmes aimed at boosting economic growth.

The new university will not require women to wear veils or cover their faces [AFP]

Saudi officials have said they are committed to spending $400bn over the next five years on various development and infrastructure projects.

The kingdom set a 2009 budget that ran a deficit for the first time in years specifically to sustain spending on such ventures.

But more than a projected research force in a region where other countries are also embracing similar initiatives - albeit on a much smaller scale - KAUST may indirectly challenge the brand of conservatism that critics say has stifled progress in the Muslim world.

"We do not restrict how they wish to work among themselves," Shih said, referring to whether men and women can freely intermingle on campus.